This is the third post in a series of posts explaining the hows and whys of ForeclosureGate and the Florida Home Loan Fraud crisis: In a rush to get paperwork filed to foreclose on defaulted mortgages, lenders cut corners and ignored the law, sometimes intentionally.
Problems with the Assignment of Mortgage, the legal document that transferred ownership of the mortgage under Florida law from Bank A to Bank B, are a large part of the mortgage fraud crisis that Florida and the rest of the country are dealing with today. To illustrate: when Bank A sold the home loan it made with the home buyer to Bank B, usually as part of a group of mortgages pooled together in a Trust, the Assignment was a critical item needed to complete that transaction. The Assignment of Mortgage, which was required to be recorded in the public records of the county in which the property was located (which rarely happened), gave Bank B legal ownership of the mortgage/home loan.
When the homeowner stopped making the mortgage payment, Bank B, through it’s loan servicer, would exercise its rights under the loan documents. Bank B’s legal recourse? To foreclose on the mortgage and obtain legal ownership of the collateral, the home, and at the same time, sue the home buyer for breaching the contract (the note). Unfortunately, short cuts were taken by the banks, the loan servicers and their attorneys, creating problems for Bank B.
Bank B’s problem: There was no Assignment of Mortgage. Or, the Assignment was flawed or unlawfully created.
According to Florida law, (as well as the real estate laws of all other states) without a proper Assignment Bank B is not permitted to pursue a foreclosure action to cover Bank B’s loss after the homeowner stopped making their mortgage payments. Bank A made the deal with the home owner, but Bank A sold the mortgage. It doesn’t matter to them if the homeowner pays the mortgage, Bank A is no longer involved in the transaction. That places Bank B in a tough spot; legally they don’t have the authority to foreclose on the collateral because they can’t prove they properly own the mortgage.
So, what did Banks do? They created Assignments out of thin air.
If the Banks (or the servicers) had valid Assignments and they could be located, there would be one less reason why we are facing a national housing crisis. Unfortunately, it wasn’t just one or two home owners who couldn’t afford to pay their mortgage payments – it was a lot of people and the volume of paperwork needed to properly foreclosure was enormous. Banks were finding themselves with a big, big problem: locating paperwork to properly foreclose was difficult at best, and in many instances the paperwork was either lost or it simply didn’t exist.
Banks were faced with defaulted mortgages in unprecedented numbers. Foreclosures had to be processed, and there were a lot of them. So much so, that law firms (for example, the Law Offices of David J. Stern) dedicated all of their time and resources instituting foreclosure actions throughout Florida. To add to the mess, banks (and Fannie Mae and Freddie Mac, etc.) wanted the foreclosures done quickly.
Assignments in large numbers needed to be found or produced each week. The banks had a huge problem, and they thought they had a great solution. If they couldn’t locate the paperwork, they would just create the documents.
So, in order to produce a large number of Assignments in a short period of time, lenders did a bizarre thing. They appointed people to create and sign assignments on their behalf, in much the same way that an individual appoints someone else to act on their behalf when they vacation out of the country.
The banks (or the servicers) used Powers of Attorney to grant authority to create and execute Assignments of Mortgage which transferred legal ownership of the mortgages from Bank A to Bank B. It probably seemed like an efficient way to deal with all of the lost or misplaced paperwork at the time, particularly when there was the time pressure to foreclose, but this was actually a very, very bad idea.
The individuals who were given the authority to act on behalf of the banks were supposed to stand in the banks’ shoes – act on their behalf. They were required to know what they were signing. They were given the task of properly preparing and executing the Assignments and to make sure the information was correct.
They didn’t. They would sit at tables and sign and sign and sign without bothering to read the stuff. Like robots. (This is how they got the nickname “robo-signers.”)
Who were these people? Didn’t they know better? Maybe these people questioned things, but they were usually low level employees at the banks or the banks’ law firms who were just doing what they were told to do. In many instances, people were signing the Assignments who didn’t actually have the authority to do so or they signed the document using the name of someone who did. It was a mess. Many of the known robo-signers included paralegals, legal secretaries, bank employees, and even newly hired loan processing employees who knew nothing about mortgage transactions.
How was this a bad thing? It was forgery and it was fraudulent. No one stopped and asked if it was permissible to create these documents. No one was checking to make sure the information in the paperwork was correct, which all too often it wasn’t. Now that law suits have been filed and Congressional investigations have taken place, we now know that these robo-signed documents included (1) fake witnesses; (2) fake dates of signing; and (3) fake signatures, among other things.
Forged documents? That’s right. There are no excuses for that behavior!
In Part 4, I Will Provide More Information About The Fraud That Took Place, Including the Story of the Now Infamous Linda Green.